HIDDEN COSTS Export financing can pay for itself in countries where the export climate is favorable. In some countries such as China, where the economics currently work against U.S. exporters. U.S. exporters are at a disadvantage.

STAY IN SyNC Options for getting payment from Chinese partners include an online store set up by Industrial and Commercial Bank of China, or accepting payments through UnionPay, which issues bank cards in China.

How Bandit Industries Recession-Proofed Its Mulching Machines

By Chipping Away At Global Markets They Were Able To Carve Out Big Profit

BUSINESS BANDITS
Company President Jerry Morey and International Sales Manager Felipe Tamayo led Bandit Industries through a global expansion that helped it win the Presidential “E” Award for Exports.

Sharelines

The Global Trade Of Mulching Machines

The Business Of Wood Chipping

Reaching As Many Customers As You Can Through Exports

Everything about The Beast was big—from its more than 70,000-pound heft, to a 60 tooth cutter mill capable of grinding 800 yards of stumps and whole trees into mulch in an hour, to its half a million dollar price tag—so when it went down, it went down fast. Into the ocean, that is.

International Sales Manager Felipe Tamayo can’t be sure if falling in the ocean ever came up whenever he spoke to his bosses at Bandit Industries about focusing more of the company’s energy on selling overseas. He did that a lot. But it must have been somewhere in the collective company’s mind because it sent along rather specific instructions to port workers about how its machines—wood chippers, stump grinders, specialty yard and virtually any other kind of wood and waste processing equipment—were to be off-loaded, given some weigh nearly 100,000 pounds and have the menacing, metallic appearance of a military assault vehicle. Though Tamayo talks about it now with the lilt of good humor he seems to bring to everything, the events of that day must have been jarring enough to leave a mental barrier because he is not able to recall the exact day or European port into which The Beast fell.

As for what he learned from the experience, he offers this exasperated, symmetrical advice: “Maaaan, always have insurance. Always have insurance, man.”

Yes, insurance is advisable for any company that exports, but it’s also nice when exports provide a company with some insurance. This is pretty much what happened at Bandit.

No, exporting didn’t save Bandit Industries, but Tamayo’s global vision married with company President Jerry Morey’s aggressive, always-push-ahead attitude/business model sped the company’s recovery from the 2008 meltdown and positioned it as a world leader in its field. Bandit was recognized this May by U.S. Secretary of Commerce Penny Pritzker with a President’s “E” Award for Exports, the highest recognition any American business can receive for making a significant contribution to the growth of U.S. exports.

In a congratulatory letter to Morey, Pritzker said Bandit had “demonstrated a sustained commitment to export expansion.” It was no coincidence that when she later presented him the award at a Washington, D.C., ceremony, Morey accepted it with Tamayo by his side; it had been Felipe’s sustained commitment that had helped bring Bandit to the stage. At the beginning of 2016, more than a quarter of the company’s revenues came through exports, a number Tamayo means to grow. Morey has no reason to doubt him.

“The best thing we did [internationally] was hire a very dynamic young man,” Morey says. “[Tamayo] really was the inspiration for what we did. He took everything to a new level.”

How Bandit got to that level provides a blueprint of sorts for American manufacturers looking to up their own global game, considering all the things that seemed stacked up against the company being a global success. Bandit has its headquarters and manufacturing plant in Remus, an unincorporated section of rural Michigan 70 miles from the nearest big city, Grand Rapids. Those wood chippers are not only virtually handmade but, in some cases, as big as a small house; they are not easily shown, packaged, shipped or, as we have learned, unloaded. What’s more, because of the nature of what their machines do and the fact that some have what amounts to military-grade destructive force, the chippers are subject to oodles of government regulations and local laws and restrictions.

And yet, every week like clockwork, five to seven full containers—and sometimes Beasts perched alone on semi-trailers—leave the plant and are shipped to customers overseas. Most go to Europe where the majority of them are—“about 60 to 70 percent” Tamayo says—but an increasing number of Bandit chippers are finding their way to South America, Africa and Australia, where the company has six sales locations. Exports have been so good that Tamayo estimates they will make up “somewhere in the neighborhood of 30 to 35 percent” of all Bandit sales by year’s end.

Those numbers would have been inconceivable as recently as 2008 when Bandit, like so many other American businesses, struggled simply to survive. Unlike the leadership at other companies, Bandit’s decided that the only path to survival was to push aggressively forward. They added facilities and implemented a major plant expansion during the recession; they poured more money into marketing and sales and gave their personnel new things to sell, expanding product lines including whole tree chippers while developing a line of forestry mowers.

As part of the push, Morey decided to focus more on exporting. It wasn’t that the company had ignored international sales, but it had always taken a “pretty laissez faire attitude,” Morey says. If sales happened, they happened. But with money tight, he figured the company had to chase sales wherever they could find them. To lead the chase he was soon relying on a young man who had shown up only recently with a graduate degree from Central Michigan University.

Morey liked Felipe Tamayo’s energy but also took note of the young man’s leadership qualities and attention to detail. Tamayo soon began to organize inventory to fit specific European markets, not only interested in what types of machines were needed in certain markets, but which would adhere to local regulations and fit on some very narrow European streets.

He found himself on the road more often than not, quickly building a stable of international dealers who showcased and demonstrated Bandit products to international customers, providing valuable intel about what was needed and desired by local customers.

“Once you start getting a group of qualified dealers who understand the ins and outs of their local market, they provide guidance on what we need,” Tamayo says.

It is both a feature and a curiosity that for all the size and ferocity of many Bandit machines, they are created virtually from the ground up by a pair of skilled technicians. Company officials believe this not only ensures a higher level of quality control—technicians have a sense of pride and ownership about “their” machine—but it also allows Bandit to completely customize each machine to a customer’s exact specifications, whether that’s giving them three axles instead of two or painting it pink for breast cancer awareness.

“We have a zillion options,” Morey says.

Tamayo wants to make sure his overseas customers have every opportunity to get every option and have their machines built to the same exacting measures as customers stateside—that someone ordering in St. Petersburg, Russia, has every bit the Bandit experience as someone in St. Petersburg, Florida.

“Most of the things we do are pretty much custom made,” Tamayo says. “You’ll see a lot of varying dimensions, a lot of varying types of operations the machines are capable of. We’re always open to whatever the customer wants. In fact, it’s actually very rare to see two similar machines.”

This meant constant communication with dealers about options and new product lines. But Tamayo also saw that it was necessary to add options specific to markets, things that had to do with the types of trees or wood to be processed by the machines or simply the size of the machines.

“The fact is, in some of these old European cities, one of our regular machines simply won’t fit on the street,” Tamayo says. “So we have to offer them something that not only will fit their needs but actually the physical environment. We’re very aware that we have to be flexible from one market to another. If we’re going to survive, we can’t put all our eggs in one basket, we have to listen to customers and pay attention to market trends.”

Tamayo’s approach was relentless and all-encompassing; if exporting was to be Bandit’s insurance, then the company opted for full coverage. And it paid off in some ways you might not expect.

“Most everyone wants to be paid in advance; they don’t want any risk,” Morey says. “Dealers only have so much capital. If you make them pay for everything in advance and it takes [equipment] 30 to 40 days to be shipped there, then they can only hold a very limited amount of inventory. So what we’ve done is extended credit and purchased insurance through Ex-Im Bank. And then we went back to our bank who, as long as we ensure it will provide us with a higher level of working capital, allowed us to extend more credit.”

Between 2010 and 2013, Bandit’s global sales volume doubled while its workforce in Remus did also. The company, which celebrated its 30th anniversary in 2013, has gone from six employees to more than 400.

The Bandit success story has become so well known that Morey is regularly contacted by officials from other regions looking to lure him, his company and their healthy sales record to their part of the country/world.

“Oh yeah, we get offered all kinds of incentives to go all over the place,” he says. “A lot of the offers come from the South but we also get them from overseas. But we’re staying here. We grew up together as a lot of young employees; most of our management team has been with us for 25 years. We feel an obligation to stay: Our employees are very loyal, and Michigan has a lot of quality people. They’re productive and, given how we make the machines, it would be hard to find others of that quality.”

One reason for Bandit’s exceptional growth is the emergence of biomass as a source of renewable energy. Biomass is created from such organic matter as wood and plant material which just so happen to be exactly the types of things Bandit machines process. The company correctly anticipated the coming opportunity in biomass back in 2008 and began to develop product lines to specifically address it.

For a company that builds machines that can make quite a racket, the most valuable thing folks there may do is listen—to customers, to dealers, designers and technicians on the manufacturing floor, all to build machines that fit every need and regulation. Morey says that this cornerstone of the company will not only continue but be enhanced for global customers, and he recently hired a head engineer specifically for those customers.

“It is our intent,” Morey says, “to get more aggressive.”

Again.

In fact, Commerce Secretary Pritzker had noted in her letter to Morey that the company’s creative ways of connecting and communicating with their European customers and dealers had particularly impressed the “E” Award Committee and that they were “very impressed with Bandit Industries’ adaption of its product line for export markets.”

Getting those products to market is never routine given their unique size and construction. Depending on models, a container can usually handle anywhere from three to four machines. That’s unless it is one of the larger machines, usually The Beast product line, some of which approach 100,000 pounds. Those machines are so big that sometimes they must simply stand alone when shipped.

Because the machines are so valuable, because they are one-of-a-kind works of destructive art that require months to create, the instructions on how they are to be handled are specific and repeated often. Tamayo has forged relationships with some freight forwarders that he uses often, but says other shipping relationships are best treated as flings.

“I have five or six forwarders I use,” he says. “But I’ve learned with some of them you have to rotate them every few months. It’s like a marriage: You’re very special when you first get together but, after a while, they’re not thinking as much about you. They’re on to someone else.”

For the most part, Tamayo says he’s been very happy with the way his products have been handled and believes that what happened to that poor, drowned Beast years ago was just an accident. Perhaps one of the reasons he can be so generous about the disaster was that he had adhered to his own advice.

He got insurance, man.

“You know, usually the people on the docks are very good. We rarely have any trouble and we always make clear, you know, ‘Grab it here, don’t grab it there.’ But that one time it happened and, I have to say, the insurance kicked right in. It paid right off. They were great. I tell people, ‘Hey man, insurance is the quickest customer you can have!”

And, as Bandit proves, exporting can ensure you’re reaching as many customers as possible; all it takes is making like The Beast and going all in.